Disney Demands End to Stan Lee Media's Claim to Own Spider-Man

Pasqual Ferry/Marvel Entertainment

An obscure musical in Pennsylvania has become the latest battleground in a rights war that simply won't end.

Predicting a conclusion to Stan Lee Media Inc.'s drawn-out battle over Spider-Man rights is somewhat of a fool's errand because every time the seemingly down-and-out company gets punched in the stomach by a judge, it figures out a new way to stand up in court again.

That said, Disney is telling a Pennsylvania judge that its legal foe must be sent a message. According to Disney's latest court papers, "The time has come for this Court to end once and for all SLMI's vexatious and repeatedly rejected claims of ownership over the Marvel Characters."

SLMI was founded by Stan Lee in the late 1990s, but around the turn of the century, the company declared bankruptcy and Lee later returned to Marvel. Around this time, SLMI's assets were raided in bankruptcy, and SLMI shareholders have been unsuccessfully attempting again and again and again to convince various judges that it lost lucrative rights improperly.

Although SLMI has suffered an epic courtroom losing streak, the prospect of gaining rights to Fantastic Four, X-Men and Spider-Man is a carrot too large to let go. The company has reportedly picked up financial backing from hedge fund Elliot Management — once Relativity Media's primary investor — and so it pursues the prize no matter how long the odds. Last September, for example, Disney defeated SLMI's billion-dollar lawsuit over alleged copyright infringement on Lee's famous comic characters. SLMI is, of course, appealing this ruling.

Meanwhile, SLMI figured out a new way to take on Disney.

Last September, Disney filed a lawsuit in Pennsylvania court against a musical production entitled Broadway: Now & Forever, which included scenes or references from The Producers, Billy Elliot, Wicked, Jersey Boys,Mary Poppins, The Lion King and yes, Spider-Man: Turn off the Dark. American Music Theatre was the defendant, and after being sued, it struck a licensing agreement with SLMI for Spider-Man rights.

After some confusion over the best procedure, SLMI eventually filed an intervenor complaint (read here) against Disney to defend the validity of its license to AMT.

Now there's discussion over whether SLMI is precluded by prior court decisions from asserting rights over Spider-Man. One of the big reasons that SLMI keeps losing is that judges keep deciding that the matter has already been determined by past judges. But SLMI believes that no judge has ever gotten to the merits of its claims of ownership over Stan Lee's creations.

Both Disney and SLMI pretty much agree on what happened in recent court decisions, but the cause of terrible animosity traces back to an interpretation of what New York Judge Paul Crotty had to say in a March 2010 decision. It was one of the first cases addressing SLMI's rights.

SLMI says that Judge Crotty dismissed a lawsuit on standing grounds because the judge determined the plaintiffs did not own stock in SLMI until after Lee assigned copyrights. Disney, on the other hand, says the judge held that the copyright claim was barred by statute of limitations and laches.

The two sides will fight over this issue, but last week, Disney gave a Pennsylvania judge two more big reasons why SLMI's claims should be terminated once and for all. (Read here in full.)

One, Disney says SLMI's claims are time-barred.

Its subsidiary Marvel and licensees "have continuously and notoriously used the Marvel Characters for more than fifty years," says Disney, adding that SLMI knew about this and could have objected when it made a deal with Stan Lee in 1998. Instead, SLMI sat on its claimed rights, continues a motion, and if there's any confusion about what Marvel actually owns, Disney says that was put to bed in an appellate court's ruling last year concerning Stan Lee colleague Jack Kirby.

Two, Disney says that SLMI is an "administratively dissolved corporation that lacks the capacity to license." Essentially, Disney says SLMI has ceased to function but for litigating since 2002. And Disney adds that under Colorado law, a dissolved corporation can't carry on its business except to "wind up and liquidate its business and affairs."

If the Pennsylvania judge accepts the arguments, it would seemingly be game over for SLMI. But we'd be a fool to say it'll really mean, The End.